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Is COVID Crutch for Zombie Companies?

For many UK businesses, furlough and government-backed loan schemes have been a lifeline, but could they become a crutch for zombie companies? According to the ONS figures, the UK economy took a crushing 25% hit from COVID in April. The threat of the deepest recession in modern history is real. So, what happens next?

Getting business back on its feet

Ensuring businesses survive is essential to UK economic recovery. In the unprecedented move, the government recovery packages stopped companies going under, but how many will stay once the furlough scheme has been withdrawn?

Upcoming insolvency law changes may help those who need a few weeks’ debt relief from creditors, but how likely are these businesses going to be healthy after the grace period? Careful management may be required to stop too many going bust all at once.

A long-term plan for saving jobs

The UK economy depends upon services, and while all sectors were affected, retail, hospitality and food services were decimated by the lockdown. With shops reopening, it’s essential to support companies to keep as many people in work as possible.

Otherwise, in the worst scenario, the UK can face up to 6M unemployed. What companies will need from the government going forward is targeted tax cuts, technology boosts and matching funds to help re-invent themselves and survive.

The good news

There are some early signs of recovery as the lockdown lifts; however, with so much scarring to the economy, it is likely to take several years to recover.

If you or your business is facing financial problems, then please do not put it off. With many business rescue tools available in the insolvency toolbox, it may mean a difference between business survival and business closure. It will also allow for contingency planning for the next emergency.

If you have any questions about business rescue procedures, need help with understanding your options or planning your future, please contact us for impartial advice on 📞0800 118 2948.

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